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Endogenous Coalition Formation in Cooperative Oligopolies

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  • Rajan, Roby

Abstract

Coalition formation among firms in a cooperative oligopolistic market is endogenously derived in terms of the relevant market characteristics: market demand, firm costs, and the behavioral assumptions that every possible coalition of firms makes about firms that are not in the coalition. This is done by defining different games in characteristic function form, each game corresponding to a different assumption about how a coalition's opponents will respond. By establishing cooperative equilibria that cannot be upset by any firm acting alone or any group of firms acting in concert, the authors are able to derive coalition formation in the market endogenously. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Rajan, Roby, 1989. "Endogenous Coalition Formation in Cooperative Oligopolies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 863-876, November.
    • Handle: RePEc:ier:iecrev:v:30:y:1989:i:4:p:863-76
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    Cited by:

    1. Patrick Rey & Jean Tirole, 2019. "Price Caps as Welfare-Enhancing Coopetition," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 3018-3069.
    2. Maria Montero, 2023. "Coalition Formation in Games with Externalities," Dynamic Games and Applications, Springer, vol. 13(2), pages 525-548, June.
    3. Kumoi, Yuki & Matsubayashi, Nobuo, 2014. "Vertical integration with endogenous contract leadership: Stability and fair profit allocation," European Journal of Operational Research, Elsevier, vol. 238(1), pages 221-232.
    4. László Á. Kóczy, 2018. "Partition Function Form Games," Theory and Decision Library C, Springer, number 978-3-319-69841-0, July.
    5. Sergio Currarini & Marco A. Marini, 2015. "Coalitional Approaches to Collusive Agreements in Oligopoly Games," Manchester School, University of Manchester, vol. 83(3), pages 253-287, June.
    6. Takayuki Watanabe & Nobuo Matsubayashi, 2013. "Note on Stable Mergers in a Market with Asymmetric Substitutability," Economics Bulletin, AccessEcon, vol. 33(3), pages 2024-2033.
    7. Currarini, Sergio & Marini, Marco, 1998. "The Core of Games with Stackelberg Leaders," MPRA Paper 22139, University Library of Munich, Germany.
    8. Paraskevas Lekeas & Giorgos Stamatopoulos, 2014. "Cooperative oligopoly games with boundedly rational firms," Annals of Operations Research, Springer, vol. 223(1), pages 255-272, December.
    9. Basso, Franco & Basso, Leonardo J. & Rönnqvist, Mikael & Weintraub, Andres, 2021. "Coalition formation in collaborative production and transportation with competing firms," European Journal of Operational Research, Elsevier, vol. 289(2), pages 569-581.
    10. Aymeric Lardon, 2019. "On the coalitional stability of monopoly power in differentiated Bertrand and Cournot oligopolies," Theory and Decision, Springer, vol. 87(4), pages 421-449, November.
    11. Artem Sedakov, 2020. "Characteristic Function and Time Consistency for Two-Stage Games with Network Externalities," Mathematics, MDPI, vol. 8(1), pages 1-9, January.
    12. Takeda, Kohei & Hosoe, Toyoki & Watanabe, Takayuki & Matsubayashi, Nobuo, 2018. "Stability analysis of horizontal mergers in a market with asymmetric substitutability," Mathematical Social Sciences, Elsevier, vol. 96(C), pages 73-84.
    13. Ikonnikova, Svetlana, 2007. "Games in the Eurasian gas supply network: Multinational bargaining, Strategic investment, and Hold-up," MPRA Paper 17852, University Library of Munich, Germany, revised Nov 2008.
    14. Chander, Parkash, 2017. "Subgame-perfect cooperative agreements in a dynamic game of climate change," Journal of Environmental Economics and Management, Elsevier, vol. 84(C), pages 173-188.
    15. Parkash Chander, 2020. "Stability of the merger-to-monopoly and a core concept for partition function games," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(4), pages 953-973, December.
    16. Paraskevas Lekeas & Giorgos Stamatopoulos, 2016. "Cooperative Games with Externalities and Probabilistic Coalitional Beliefs," Working Papers 1605, University of Crete, Department of Economics.
    17. Jingang Zhao, 2009. "Estimating Merging Costs by Merger Preconditions," Theory and Decision, Springer, vol. 66(4), pages 373-399, April.

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